Pension Sub-committee And Pension Board - 18/08/2004

At a MEETING of the SUPERANNUATION INVESTMENT SUB COMMITTEE OF THE FINANCE COMMITTEE held at Dundee on 18th August 2004.

Present:-

Bailies

C D P Farquhar

Neil I C Powrie

Councillors

George Regan

Joe FitzPatrick

Nigel Don

Mr Willie Gowans, Full Time Trade Union Officers' Group

Councillor Regan, Convener, in the Chair.

The minute of meeting of this Committee of 19th May 2004 was noted.

Unless marked thus * all items stand delegated.

I SOCIALLY RESPONSIBLE INVESTMENT UPDATE

There was submitted Report No 583-2004 by the Depute Chief Executive (Finance) updating the Committee on the Fund Managers responses to issues raised following consideration of socially responsible investment at the Sub-Committee meeting on 19th May 2004 (Article II refers). At this meeting some concerns were raised over specific engagements by Managers and more generally how they independently checked information supplied by companies.

The Sub-Committee noted the replies by the Fund Managers and further agreed that SRI Managers should attend the Sub-Committee once a year.

The Sub-Committee noted that the Convener had agreed that the undernoted item be considered as a matter of urgency in terms of Standing Order No 17(b) in view of the timescales involved.

II FIDELITY TRUSTEE TRAINING SEMINAR, EDINBURGH 24TH NOVEMBER 2004

The Sub-Committee was informed that Fidelity Pensions Management and Financial Administration Services Limited would be running a Trustee Training Seminar at the Balmoral Hotel, Edinburgh on 24th November 2004.

It was agreed that any Elected Member interested could attend the Seminar - any such member wishing to attend was asked to notify the Principal Treasury and Investment Officer by 3rd September 2004.

The Sub-Committee resolved under Section 50(A)(4) of the Local Government (Scotland) Act 1973 that the press and public be excluded from the meeting for the undernoted items of business on the grounds that they involved the likely disclosure of exempt information as defined in paragraphs 4, 6 and 11 of Part I of Schedule 7A of the Act.

III SECURITIES LENDING

There was submitted Report No 584-2004 by the Depute Chief Executive (Finance) providing an update on the implementation of the Securities Lending Programme which was agreed on 19th November 2003. (Article III refers). The programme had worked smoothly so far and safeguards had been put in place to ensure voting rights were maintained. Income received had been in line with expectations.

The Sub-Committee noted the results achieved by the Securities Lending Programme so far.

IV TAYSIDE SUPERANNUATION FUNDS

(a) PERFORMANCE SUMMARIES

There was submitted Report No 585-2004 by the Depute Chief Executive (Finance) reviewing the investment performance of the Main Funds Four Fund Managers (excluding Property) for the quarter to 30th June 2004. The Report also considered the performance of the Transport Fund which shared two of the Managers. The Report compared investment performances of the Funds with the Funds' specific benchmarks which consisted of various stock market indices.

The Sub-Committee noted that two Fund Managers had under performed the benchmark for the quarter to 30th June 2004. The Transport Fund had also under performed the benchmark for the same quarter. The Report also incorporated the Fund Managers' performance for the year to 30th June 2004 and also the three-year period to 30th June 2004.

The Sub-Committee noted the information contained in the Report with regard to the performance of the Tayside Superannuation Fund and the Tayside Transport Superannuation Fund and their Fund Managers.

The Sub-Committee also agreed that Fidelity be invited to give a presentation to the next meeting instead of Schroder Property Investment Management Limited.

(b) PERFORMANCE SUMMARY (PROPERTY PORTFOLIO)

There was submitted Report No 586-2004 by the Depute Chief Executive (Finance) reviewing the investment performance of the Property Portfolio managed by Schroder Property Investment Management Limited for the quarter to 30th June 2004 and for the twelve-month period to the same date. The Report compared investment performances with an appropriate benchmark from April 2004.

The total portfolio out performed the benchmark for the quarter and the year to 30th June 2004. The annualised three-year performance to 30th June 2004 was also detailed. It was noted that exposure to Schroder Exempt would continue to be reduced.

The Sub-Committee noted the information contained in the report with regard to the performance of the Property Portfolio managed by Schroder Property Investment Management Limited.

There was submitted Report No 572-2004 by Depute Chief Executive (Finance) summarising investments and transactions in the period 1st April to 30th June 2004.

The Sub-Committee noted the information contained in the Report.

V STAKEHOLDERS SURVEY RESULTS

There was submitted Report No 587-2004 by the Depute Chief Executive (Finance) presenting the results of the recent stakeholders survey and considering possible improvements in service based on the feedback received. Two separate consultation questionnaires were issued on 13th May 2004 on Superannuation Investment Services. In general, the members responses were very positive. However two areas were identified where further consideration of current provision was required - these were quarterly updates and training.

A new abbreviated style of Fund Manager report was tabled and it was agreed that the style should be adopted by each Fund Manager in time for the next Sub-Committee meeting.

After discussion, it was agreed that training should take place at the end of Sub-Committee meetings - the Depute Chief Executive (Finance) explained that this was probably the most cost effective way of providing training. It was agreed that a finishing time should be stipulated for the Sub-Committee meetings.

VI COMMISSION RECAPTURE

There was submitted Agenda Note AN313-2004 stating that the Fund currently had an arrangement with Lynch, Jones and Ryan whereby a proportion of certain transaction commissions paid by the Managers could be rebated to the Fund.

Baillie Gifford had now indicated their willingness to join the other Managers in the scheme and this provided the opportunity to review the overall arrangements - four firms had been invited to tender. The closing date for replies would be 31st August 2004 and it was intended that the new contract would start on 1st October 2004.

The Sub-Committee approved the recommendation that the Depute Chief Executive (Finance) be delegated powers to select the best candidate and report back to the next Sub-Committee meeting.

VII PRESENTATION

John Carson, Tom Wright and Kenny Bell of Baillie Gifford gave a presentation. John Carson acknowledged that Baillie Gifford had under performed in 2003 and 2004 to date although they had out performed the benchmark during the ten-year period 1993-2003. Tom Wright outlined the reasons for this under performance but stated that Baillie Gifford were optimistic about the prospects for improvement with the most influential medium term factor being the strength of corporate earnings.

Kenny Bell reported on recent SRI engagements. Improvements had been brought about and issues such as executive remuneration would continue to be addressed in 2004/2005.

The Speakers were thanked by the Convener.

GEORGE REGAN, Convener.

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